Today, FinTech is driving innovation in financial markets across the globe. New technologies are wide-ranging in scope, from cloud computing and algorithmic trading to distributed ledgers to artificial intelligence and machine learning to network cartography, and many others. These technologies have the potential for significant or even transformational impact on CFTC regulated markets and the agency itself. One of the most recent marketplace developments driving a lot of interest is the rise in prominence of virtual currencies, specifically bitcoin. Below are resources for market participants and customers on virtual currency and the CFTC's role in oversight of this emerging innovation.
This downloadable brochure provides basic information about Bitcoin, such as what Bitcoin is, the CFTC’s jurisdiction, and how virtual currencies can be a target for fraud and for hackers. If you’re new to Bitcoin, this guide provides an introduction and points you to more useful information about Bitcoin and its risks.
An Introduction to Virtual Currency
This downloadable pamphlet is a quick guide to virtual currencies. It covers how virtual currencies can be purchased, why they are considered commodities, and what types of fraud can be found in the market. Use this guide to explore the world of virtual currencies and learn about potential risks.
Customer Advisory: Beware Virtual Currency Pump-and-Dump Schemes
This customer advisory highlights virtual currency pump-and-dump schemes that occur in the largely unregulated cash market for virtual currencies and digital tokens, and typically on platforms that offer a wide array of coin pairings for traders to buy and sell. While the scams have been around as long as the virtual currency markets themselves, the number of new virtual currency and digital coin traders has grown substantially, increasing the number of potential victims or perpetrators.
CUSTOMER ADVISORY: BEWARE OF “IRS APPROVED” VIRTUAL CURRENCY IRAs
Virtual currency prices have experienced wild price swings recently. This volatility is not reduced or limited just because the virtual currencies are held in an individual retirement account (IRA). This customer advisory is designed to encourage investors to be cautious of sales pitches touting “IRS approved” or “IRA approved” virtual currency retirement accounts.
CFTC BACKGROUNDER ON OVERSIGHT OF AND APPROACH TO VIRTUAL CURRENCY FUTURES MARKETS:
This backgrounder provides clarity regarding federal oversight of and jurisdiction over virtual currencies; the CFTC’s approach to regulation of virtual currencies; the self-certification process generally, as well as specifically regarding the recent self-certification of new contracts for bitcoin futures products by designated contract markets (DCMs); background on the CFTC’s “heightened review” for virtual currency contracts; and a discussion of the constituencies the CFTC believes could be impacted by virtual currency futures.
VIRTUAL CURRENCY PRIMER:
LabCFTC, the CFTC's FinTech initiative, produces primers intended to be an educational tool regarding emerging FinTech innovations. LabCFTC believes that promoting education, understanding, and regulatory clarity around emerging technologies can help facilitate market-enhancing innovation and guard against risks. This primer provides an overview of virtual currencies and their potential use-cases, helps outline the CFTC's role and oversight of virtual currencies, and cautions investors and users of the potential risks involved with virtual currencies.
VIRTUAL CURRENCY PODCAST:
CFTC Talks is the Commission's podcast that's geared towards providing information about the commodity markets, futures trading and other information about conditions in the U.S. and abroad affecting the markets. This episode of the podcast features a roundtable panel made up of CFTC leaders to discuss what is Bitcoin, what is the self-certification process of new contracts on Bitcoin and what is the CFTC role in regulating the new derivatives contracts. Hosted by Chief Market Intelligence Officer Andy Busch, this episode features a dicussion with LabCFTC's Daniel Gorfine, DMO's Amir Zaidi, DCR's Brian Bussey and DSIO's Matt Kulkin.
SELF-CERTIFICATION FACT SHEET
On Friday, December 1, 2017, the Chicago Mercantile Exchange Inc. (CME) and the CBOE Futures Exchange (CFE) self-certified new contracts for bitcoin futures products and the Cantor Exchange self-certified a new contract for bitcoin binary options. This fact sheet outlines the self-certification process of the Commodity Futures Trading Commission (CFTC), as well as the CFTC's role in oversight of virtual currencies.
LabCFTC is the focal point for the CFTC's efforts to promote responsible FinTech innovation and fair competition for the benefit of the American public. LabCFTC is designed to make the CFTC more accessible to FinTech innovators, and serves as a platform to inform the Commission's understanding of new technologies. Further, LabCFTC is an information source for the Commission and the CFTC staff on responsible innovation that may influence policy development. For additional information on LabCFTC, please visit LabCFTC.
CUSTOMER ADVISORY: RISKS OF VIRTUAL CURRENCY TRADING
Virtual currency is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value, but it does not have legal tender status. Virtual currencies are sometimes exchanged for U.S. dollars or other currencies around the world, but they are not currently backed nor supported by any government or central bank. Their value is completely derived by market forces of supply and demand, and they are more volatile than traditional fiat currencies. Profits and losses related to this volatility are amplified in margined futures contracts. This customer advisory is designed to inform the public of possible risks associated with investing or speculating in virtual currencies or recently launched Bitcoin futures and options.
CFTC Ethics Guidance to Staff Regarding Cryptocurrencies
The CFTC's General Counsel has issued ethics guidance to all CFTC staff regarding employee holdings and transactions in cryptocurrencies. Employees of government agencies, like the CFTC, are subject to long established laws and regulations on conflicts of interest, insider trading and ownership restrictions of regulated assets. While the CFTC cannot legally ban the ownership of cryptocurrencies by all employees, Chairman Giancarlo has made it clear that anyone at the agency involved in oversight of this market should not own cryptocurrencies. Under the conflict of interest law, 18 U.S.C. 208, as implemented by the Office of Government Ethics at 5 C.F.R. Part 2640.103, it is illegal for federal employees to participate personally and substantially in any particular matter that will directly and predictably affect their financial interests or their imputed financial interests. Additionally, all CFTC employees are restricted from trading in all futures and swaps, as well as margined or leveraged commodities products. Under federal law, it is a felony punishable by a fine of up to $500,000 or imprisonment for up to five years, or both, for any Commissioner of the Commission or any employee or agent thereof, to participate, directly or indirectly, in prohibited transactions, or to use nonpublic information to participate, directly or indirectly, in any transaction in an actual commodity or commodity futures.